DOE/EIA diesel price jumps to level not seen in almost 3 years

The weekly Department of Energy/Energy Information Administration (DOE/EIA) diesel price took a ride on last week’s Hurricane Ida-driven surge in prices to return to levels it had not seen since 2018.

The price of $3.373 a gallon was up 3.4 cents a gallon from the prior week. It was the largest one-week increase since a 6.1-cent jump on May 17. And that outright price level has not been seen since the $3.394 a gallon recorded Oct. 15, 2018.

Once again for a Monday, or in this case, Tuesday because of Labor Day, there was a move in the commodity price of ultra low sulfur diesel on the CME commodity exchange that went in a significantly opposite direction from the change in the DOE/EIA price, which is the basis for most fuel surcharges.

But while it might just be something that previously was merely coincidental, it’s significant now because it is signaling that any sort of surge in prices as a result of Hurricane Ida has run its course.

The ULSD price on CME settled on Aug. 27, the last trading day before Ida, at $2.1092 a gallon. It climbed as high as $2.1677 Thursday before ultimately sliding Tuesday to $2.1216, declining 3.05 cents a gallon on the first trading day after the Labor Day holiday.

But during last week’s rise in the ULSD price on CME, the wholesale price of diesel around the country was rising, helping to boost retail prices along with it. The ULSDR.USA data series in FreightWaves SONAR recorded a national average wholesale diesel price Tuesday morning of $2.343 a gallon, up from $2.258 on Aug. 27. Retail prices generally move more in tandem with wholesale prices on the way up than on the way down, as retailers try to hang on to higher prices as long as they can. 

To learn more about FreightWaves SONAR, please go here.

Given that, the surge in wholesale diesel prices last week was likely to be a key factor in the jump in retail prices reflected in the higher DOE/EIA number.

Crude prices also fell Tuesday despite the fact that there is still a significant amount of oil production in the U.S. Gulf of Mexico shut in in the wake of Ida. But after declining for the final days of August, the value of the U.S. dollar climbed again Tuesday, a big jump that helped push down the price of oil and all commodities that are priced in dollars. Oil prices and the value of the dollar tend to move inversely.

Even as the resumption of oil production in the Gulf of Mexico lags, refineries in Louisiana that had been shut by Ida are coming back online.

News reports said two of the country’s largest refineries — the Marathon facility in Garyville, Louisiana, and ExxonMobil’s refinery in Baton Rouge, Louisiana — had resumed operations. Two smaller Louisiana refineries were said to be coming back online.

The return of refineries that is not being matched by the return of oil production in the Gulf could be a reason why diesel is weakening against crude. The spread between the global crude Brent benchmark and the price of ULSD on CME slid about 1.5 cents over the last two trading days. 

Crude supplies to refineries have been aided in part by a 1.5 million-barrel release of crude from the Strategic Petroleum Reserve to ExxonMobil. The release is part of a swap in which ExxonMobil will replenish those supplies at a later day.

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